Toronto – from www.reuters.com – Smaller Canadian Internet service providers, who operate via networks owned by bigger telecom firms such as BCE Inc, will soon have to pass along the bulk of their host’s charges for extra bandwidth use, the federal telecom regulator said on Tuesday.

The move limits the independent ISPs’ ability to offer unlimited data plans, just months after Netflix (NFLX.O) opened for business in Canada, and gives greater pricing power to large carriers such as BCE’s (BCE.TO) Bell unit and Telus (T.TO).

The new usage-based billing policy takes effect March 31. However, the Canadian Radio-television and Telecommunications Commission (CRTC) gave the smaller ISPs a 15 percent discount on the retail rates cable and telecom carriers charge their own customers, citing a balance between fostering competition and the incumbents’ right to manage traffic on their networks.

“It a very big slap in the face,” said Rocky Gaudrault, the chief executive of small ISP TekSavvy.

“We’ve just become a collection agency for the monopolies, with a 15 percent space to make the collections occur.”

Bell, which forced the issue back in 2009, said the explosive growth in Internet traffic and the load it puts on networks — thanks in part to video download services such as Netflix and Apple’s iTunes (AAPL.O) — mean flat-rate pricing was no longer viable.

Big Internet providers in Canada, which also include cable and media company Rogers Communications (RCIb.TO), have for some years charged their customers per-gigabyte fees for exceeding the limit of their monthly plans, which range from as little as 2 gigabytes up to 100.

The smaller ISPs often offer plans with 200 gigabyte ceilings, or even unlimited use.

Prior to the CRTC’s decision the big telecom incumbents, who are mandated to lease their networks to small providers, were unable to pass along usage-based charges to their wholesale customers.

Pricing data submitted to the CRTC in 2009 showed that companies such as TekSavvy offer much cheaper service than Bell and Telus, with much more bandwidth.

“We’re about to have a retail pricing regime implementing on our wholesale product,” said Bill Sandiford, president of Telnet Communications and chairman of the Canadian Network Operators Consortium, which represents 23 independent ISPs.

Sandiford said CNOC was considered its legal options in light of the decision.

The CRTC ruling gives a solid framework to earlier decisions approving wholesale usage-based billing for Bell units in May and October last year.

In August, the CRTC said the big established companies must provide wholesale access to competitors using their networks at the same speed as they offer to their own customers but could charge a 10 percent mark-up. [ID:nN30191728] (Reporting by Alastair Sharp; editing by Rob Wilson)